Correlation Between Microsoft and Carlsberg
Can any of the company-specific risk be diversified away by investing in both Microsoft and Carlsberg at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Microsoft and Carlsberg into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Carlsberg AS, you can compare the effects of market volatilities on Microsoft and Carlsberg and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Microsoft with a short position of Carlsberg. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Carlsberg.
Diversification Opportunities for Microsoft and Carlsberg
Excellent diversification
The 3 months correlation between Microsoft and Carlsberg is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Carlsberg AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlsberg AS and Microsoft is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Microsoft are associated (or correlated) with Carlsberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlsberg AS has no effect on the direction of Microsoft i.e., Microsoft and Carlsberg go up and down completely randomly.
Pair Corralation between Microsoft and Carlsberg
Given the investment horizon of 90 days Microsoft is expected to under-perform the Carlsberg. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.3 times less risky than Carlsberg. The stock trades about -0.19 of its potential returns per unit of risk. The Carlsberg AS is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 112,000 in Carlsberg AS on January 19, 2024 and sell it today you would earn a total of 500.00 from holding Carlsberg AS or generate 0.45% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 90.91% |
Values | Daily Returns |
Microsoft vs. Carlsberg AS
Performance |
Timeline |
Microsoft |
Carlsberg AS |
Microsoft and Carlsberg Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Carlsberg
The main advantage of trading using opposite Microsoft and Carlsberg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Carlsberg can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Carlsberg will offset losses from the drop in Carlsberg's long position.Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
Carlsberg vs. AP Mller | Carlsberg vs. ROCKWOOL International AS | Carlsberg vs. Royal Unibrew AS | Carlsberg vs. Tryg AS |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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